Laos Economic Forecast

Absent official data, the economy in 2022 likely grew at a similar pace to 2021, supported by looser Covid-19 restrictions and the Laos-China railway. That said, the debt and cost-of-living crises, heavy floods in H2 and a sharp currency depreciation will have tempered growth prospects. Turning to the current year, available data paints a mixed picture. Inflation remained at near-record highs through April. Coupled with 100 basis points of monetary policy tightening in February, this has likely stifled domestic demand. More positively, cross-border economic activity via the Laos-China railway has benefitted from the reopening of the Boten-Mohan international border crossing on 8 January; cargo volumes on the route surged by over 150% year on year between January and April, boding well for the external sector.

Inflation fell to 39.9% in April (March: 41.0%). The headline rate should cool further from current levels in 2023 on a high base effect and lower imported price pressures. That said, the depreciation of the kip and still-high fuel and fertilizer prices will keep inflation elevated. Stronger-than-expected domestic activity and commodity-price volatility pose upside risks.